Farmers in the United States (US) have been struggling with low yield prices for some time. In addition, they also had to deal with extreme weather conditions this year and the effects of US President Donald Trump's trade war are clearly felt. However, the president and his government also fully support the farmers financially.
Evert van der Sluis (60) grew up on a dairy farm in Poppingawier in Friesland. He came to the United States about 35 years ago and since 1998 Van der Sluis has been a lecturer Professor of Economics at South Dakota State University in Brookings (international economics and agricultural economics).
He closely monitors what the US government is implementing at higher tariffs and closely monitors what changes in all trade agreements. As a result, American soybeans no longer go to China and Mexico wants to receive less dairy and pork. How does Van der Sluis view the developments of the number 1 in the export of agricultural products?
What about the US primary agricultural sector?
“A combination of factors has been difficult for American farmers in recent years. Due to the spring flooding (across almost the entire Midwest), the fields have been unable to seed or the crops are in poor condition. the harvest will be is still unknown."
"In addition, the selling prices for many crops have fallen in recent years. Many farmers were not concerned about this before, because the debts were relatively low. However, those debts have increased in recent years. Young farmers have to dig deep into this. the debts are working and on average it is very difficult for them to keep their heads above water. On top of that came the battle over trade agreements due to the policies of this administration led by President Trump."
What is the impact of Trump's actions?
“His intention was not to intentionally hit the agricultural sector, but it does happen. In the United States, we import almost everything except various services (such as Hollywood movies and Microsoft) and agricultural products. "We are the world leader. Farmers are rightly concerned that it may take a long time to recapture the markets that have been built up. Breaking down markets is easy; rebuilding is difficult and time-consuming."
"In general, Trump still receives a lot of support from farmers, because he also supports the sector through various programs. However, I wonder how long that support will continue, because slowly but surely the consequences are really being felt for farmers. in the pricing of their products."
How does the government support farmers?
"There are many programs. For dairy farming, for example, there is a plan called 'Dairy Margin Coverage'. Anyone who fears that the margin between feed costs and milk yields will be negative can sign up for this plan. You then pay a premium per kilo. milk. When the margin falls below the registered amount, the difference is paid over the total number of liters for which you are registered. Of the 37.000 dairies in the United States, 13.000 have registered so far. $145 million was available for this. Average per company is that's just over $11.000. Mind you, that's an average; bigger companies get more and smaller companies get less."
“The bigger money, however, is in supporting crop insurance. The premium for this is subsidized for 62% by the government. That is paid from the $16 billion that is part of the Farm Bill, which includes the 'Prevented Planting' plan. This means that those who were unable to sow due to the wet spring, will still receive part of the yield from the government (55% times the average yield of the last 10 years times the current market price). n €750 per hectare, without incurring costs for the land work, sowing seed and fertilizer."
- Evert van der Sluis
"Following the high tariffs imposed on China and Mexico, the government has also released another $12 billion to support farmers in various ways. However, this is largely split between the loss of income on the crops, almost everything on soy. On average, arable farmers benefit. more than dairy farmers, an additional $16 billion was recently released as compensation the effects of the trade wars. This money will probably be distributed more widely."
"It may seem strange that the government pays most of the crop insurance, but before that you always had state aid if another crop had failed. The American government wanted to tackle those political discussions and therefore has (first through 'decoupled' direct aid that later became no longer politically acceptable) was converted into these kinds of plans."
How will the trade wars affect farmers further?
"With the collapse of the Trans-Pacific Partnership, a potential market (Japan) has been lost. This would have offered many opportunities and therefore also cost the farmers money, while the remaining TPP countries have signed the treaty. Other countries have also (such as the European Union) has continued to improve international trade relations, and of course there is also the battle with China, the high import tariffs and that NAFTA (with Canada and Mexico) now appears to have been converted to the USMCA, or rather a slightly changed NAFTA."
"Mexico is an important export market for dairy farmers. It is difficult to say how much the reduced export to Mexico will cost. However, it has a negative impact on milk prices. About 35% of the milk products exported from the United States go to to China and Mexico: nearly $2 billion per year Over the next 5 years, approximately 7% less dairy products will be exported to China and Mexico each year from a baseline, the total value of this export loss would be approximately $2,7 .XNUMX billion could run out."
Now that large parts are suffering so much from the bad weather, is it expected that feed prices will rise sharply?
"It is difficult to estimate how many hectares have not been sown and how much less yield will be achieved from the hectares that were sown later. For the time being, it seems to be more than 4 million hectares, but it will probably be even more. of Agriculture (USDA) released a new report on the expectation of how many hectares have been sown and not sown, which may already be quite moving the market, with the expectation that lower harvests, especially in the United States themselves, the prices are going to rise nicely."
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